Segment Information

6 Months Ended

Jun. 30, 2020

As a result of the Acquisitions, the Company added a third reportable segment, AvKARE, to its existing reportable segments, Generics and Specialty. Generics develops, manufactures and commercializes complex oral solids, injectables, ophthalmics, liquids, topicals, softgels, inhalation products and transdermals across a broad range of therapeutic categories. Generics’ retail and institutional portfolio contains approximately 250 product families, many of which represent difficult-to-manufacture products or products that have a high barrier-to-entry, such as oncologics, anti-infectives and supportive care products for healthcare providers.

Specialty delivers proprietary medicines to the U.S. market. The Company offers a growing portfolio in core therapeutic categories including central nervous system disorders, endocrinology, parasitic infections and other therapeutic areas. The Company's specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists, movement disorder specialists, endocrinologists and primary care physicians in key markets throughout the U.S. Specialty also has a number of product candidates that are in varying stages of development.

AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and surgical products. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment operating income (loss). Items below income (loss) from operations are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in "Corporate and Other." The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker.

The tables below present segment information reconciled to total Company financial results, with segment operating income or loss including gross profit less direct selling expenses, research and development expenses, and other operating expenses to the extent specifically identified by segment (in thousands):


Three Months Ended June 30, 2020	Generics ⁽¹⁾⁽²⁾		Specialty ⁽²⁾		AvKARE ⁽¹⁾		Corporate and Other		Total Company
Net revenue	$	306,559	$	94,256	$	63,847	$	—	$	464,662
Cost of goods sold	218,909		50,229		50,528		—		319,666
Cost of goods sold impairment charges	759		—		—		—		759
Gross profit	86,891		44,027		13,319		—		144,237
Selling, general and administrative	12,802		16,870		15,647		35,625		80,944
Research and development	40,316		5,256		—		—		45,572

Intellectual property legal development expenses	3,550		—		—		—		3,550
Charges (gains) related to legal matters, net	3,050		(1,750)		—		—		1,300
Other operating expenses	657		82		—		1,381		2,120
Operating income (loss)	$	26,516	$	23,569	$	(2,328)	$	(37,006)	$	10,751


Six Months Ended June 30, 2020	Generics ⁽¹⁾⁽²⁾		Specialty ⁽²⁾		AvKARE ⁽¹⁾		Corporate and Other		Total Company
Net revenue	$	659,145	$	182,233	$	121,817	$	—	$	963,195
Cost of goods sold	437,774		98,047		97,423		—		633,244
Cost of goods sold impairment charges	2,215		—		—		—		2,215
Gross profit	219,156		84,186		24,394		—		327,736
Selling, general and administrative	29,425		37,812		26,435		65,248		158,920
Research and development	69,350		12,601		—		—		81,951
In-process research and development impairment charges	960		—		—		—		960
Intellectual property legal development expenses	4,815		5		—		—		4,820
Charges related to legal matters, net	5,550		250		—		—		5,800
Other operating expenses	703		82		—		5,958		6,743
Operating income (loss)	$	108,353	$	33,436	$	(2,041)	$	(71,206)	$	68,542

(1)Operating results for the sale of Amneal products by AvKARE are included in Generics.

(2)During the three months ended September 30, 2019, operating results for Oxymorphone were reclassified from Generics to Specialty, where it is sold as a non-promoted product. Prior period results have not been restated to reflect the reclassification.


Three Months Ended June 30, 2019	Generics		Specialty		Corporate and Other		Total Company
Net revenue	$	335,064	$	69,578	$	—	$	404,642
Cost of goods sold	263,423		32,958		—		296,381
Cost of goods sold impairment charges	3,012		—		—		3,012
Gross profit	68,629		36,620		—		105,249
Selling, general and administrative	14,379		16,150		36,752		67,281
Research and development	45,448		2,568		—		48,016

Intellectual property legal development expenses	2,511		—		—		2,511
Acquisition, transaction-related and integration expenses	987		1,366		1,166		3,519
Restructuring and other charges	418		—		2,417		2,835
Operating income (loss)	$	4,886	$	16,536	$	(40,335)	$	(18,913)


Six Months Ended June 30, 2019	Generics		Specialty		Corporate and Other		Total Company
Net revenue	$	717,541	$	133,221	$	—	$	850,762
Cost of goods sold	542,301		63,823		—		606,124
Cost of goods sold impairment charges	56,309		—		—		56,309
Gross profit	118,931		69,398		—		188,329
Selling, general and administrative	38,527		37,477		75,713		151,717
Research and development	95,599		6,275		—		101,874
In-process research and development impairment charges	22,787		—		—		22,787
Intellectual property legal development expenses	5,632		1,045		—		6,677
Acquisition, transaction-related and integration expenses	3,584		3,250		2,717		9,551
Restructuring and other charges	2,499		178		6,319		8,996
Operating (loss) income	$	(49,697)	$	21,173	$	(84,749)	$	(113,273)